Home health, long-term care, and other compliance activities

Healthcare Financial Management, April, 1999 by Todd D. Anderson, John W. Sadoff, Jr.

With a policy of zero tolerance of healthcare fraud and abuse, the Federal government has redoubled its efforts to investigate questionable financial behavior of healthcare organizations. Congress has encouraged efforts to recover healthcare payments secured through fraudulent or abusive means, and coming into this election year, it likely will increase the legislative anti financial support for such efforts. According to the Office of Inspector General (OIG), the FBI dedicated more than 600,000 hours to fraud and abuse investigations in 1995, and OIG staffing, which increased 20 percent in 1997, is expected to double by 2002.

A number of circumstances can trigger an investigation, including audit findings, patient or employee complaints, and clinical reviews. Having an effective compliance program in place, however, can help healthcare organizations reduce their legal and regulatory, exposure and may help mitigate damages should a government investigation uncover evidence of fraudulent or abusive behavior.

Government Antifraud Initiatives

The Federal government has several weapons in its antifraud arsenal. Operation Restore Trust (ORT), a program established in 1995 to investigate overpayments to nursing homes and home health agencies, has become an effective initiative for the recovery of overpayments. As a pilot project limited to five states, ORT investigations resulted in $188 million in recoveries. ORT now has been expanded to 17 states and eventually will operate in all 50 states. In addition, the program will be expanded to include different types of providers and services.

The Federal government also has used broad application of provisions of the False Claims Act to crack down on suspected cases of fraud and abuse. While some charges brought against providers under the False Claims Act have been refuted successfully, the Department of Justice and the OIG continue to resist setting enforcement limits so as to be able to apply the act as broadly as possible.

In addition, healthcare organizations must be prepared to defend themselves against lawsuits filed under qui tam, or whistle-blower, statutes. Whistle-blowers whose actions lead to a successful qui tam lawsuit against a healthcare organization can receive as much as 30 percent of any judgment awarded. Because of the attractiveness of this financial incentive and perhaps as a result of a heightened awareness among individuals, particularly those working for healthcare organizations, of the nature of fraudulent activities, qui tam lawsuits have increased from 33 cases in 1987 to approximately 530 cases during 1997. The financial judgments resulting from these cases have increased from $355,000 in 1988 to more than $625 million during 1997, with an average recovery of approximately $7.2 million.(a)

The IRS also has been investigating both for-profit and not-for-profit healthcare organizations aggressively. Some not-for-profit healthcare organizations may have their tax-exempt status reviewed clue to violations of rules and regulations governing tax-exempt entities as set forth in Sections 501-530 of the Internal Revenue Code (IRC).

Congress's passage in 1996 of the Taxpayer Bill of Rights 2 gave the IRS additional power to assess penalties called intermediate tax sanctions on disqualified persons involved in excess benefit transactions.

The Next Targets

The home health and long-term care segments of the healthcare industry have been targeted as the next major focus of fraud and abuse investigations, largely because oversight of these segments has been relatively lax to date. These two industry segments also represent the most rapidly growing share of Medicare expenditures.

The OIG currently is conducting and preparing to conduct several studies that could greatly affect provider organizations, particularly with regard to home health and long-term care, in the years to come. These nationwide studies (except where indicated) include the following:

Hospital ownership of home health agencies. This study will determine more precisely how and to what extent hospital ownership of home health agencies affects referrals to these agencies.

General and administrative costs. This study will comprise a series of reviews to determine whether general and administrative costs incurred in chain organizations should be eligible for Medicare payment.

Home health agency cost reports. This limited-scope retrospective review of Medicare cost reports will determine if home health agencies in selected states properly documented the reasonableness of costs (eg, salaries and miscellaneous and accrued costs) for which payment was claimed.

Home health eligibility reviews. This study, currently under way, is being conducted to determine whether home health visits claimed by various home health providers meet Medicare payment guidelines. Thus far, OIG reviews of home health agency claims in California, Illinois, New York, and Texas have found that 40 percent of the services billed did not qualify, for Medicare payment.